**[investwise]** In A Dramatic Turn, US Housing Sinks-Values Could Fall As Much As 20 %

 

The US housing market is taking a turn for the worse. Tuesday's report from the National Association of Realtors about sales of previously occupied homes is expected to show sales plunged in July. Economists are predicting as much as a 26 percent drop from a month earlier to a seasonally adjusted annual rate of 3.95 million. That would be the worst month for sales in more than a decade. Many say the market is hurting because buyers and sellers are in a standoff over home prices. Sellers have unrealistic expectations about their home values and are listing properties on the high end.   Buyers are afraid home prices will start falling after being flat nationally for about a year and even rising in some parts of the country. "It really is a self-fulfilling prophecy," said Aaron Zapata, a real estate agent in Brea, Calif. "If all buyers perceive that home prices are coming down, then they will stop making offers - and home prices will come down."   The housing market is also being hampered by a weakening economic recovery. Unemployment remains stuck at 9.5 percent and many prospective buyers worry they might not have a job to pay the mortgage. Prices are low, but that's largely because foreclosures are running about 10 times higher than before the housing bust. And while mortgage rates are at the lowest levels in decades, many people can't qualify because banks are being selective in the tough economy.       Home sales picked up in the spring when the government was offering tax credits, with the best incentives for first-time homebuyers. But the tax credits expired on April 30 and the market has been hobbled since.   Last month, first-time buyers made up just over 39 percent of sales, down from more than 48 percent in March, according to a survey of more than 3,000 real estate agents by industry research firm Campbell Surveys. If the economy slips back into a recession, analysts predict the housing market will get a lot worse.   Moody's ( MCO - news - people ) Analytics projects that home prices could drop another 20 percent by early 2012 if there is another recession. Even if the recovery remains on track, Moody's forecasts that prices will falling another 5 percent and hit bottom early next year.   A continuing surge of foreclosures is also making the problem worse.   The nation is now on track to have more than 1 million homes lost to foreclosure by the end of the year, according to foreclosure listing service RealtyTrac Inc. That would eclipse the more than 900,000 homes repossessed in 2009, and compares with the more than 100,000 homes that lenders typically seized per year before the housing bust.   Those at risk of foreclosure are having a hard time getting help. Nearly half of the 1.3 million U.S. homeowners who enrolled in the Obama administration's flagship mortgage-relief program have fallen out, the Treasury Department said last week. That compares with about 422,000 homeowners, or roughly 32 percent of those who started the program, have received permanent loan modifications and are making their payments on time. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.   Nothing in this article is, or should be construed as, investment advice.

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